EOH cuts losses as restructuring progresses


EOH cuts losses as restructuring progresses

Published Date: 2020-03-20 | Source: Stephen Gunnion | Author: Stephen Gunnion

EOH cuts losses as restructuring progresses

The technology group is halfway through a two-year turnaround as it cuts costs, sells non-performing businesses and reduces debt.

EOH says it will report much reduced losses for the first half of its financial year as it reaches the halfway mark in a two-year turnaround plan.

In a trading statement, the technology group said it had made good progress on a number of initiatives, including cost savings, sorting out its balance sheet and adapting its business model. Management was also working through inherited legacy issues, including poor governance in some of its public sector contract awards, as well as underperforming businesses and large interest payments due to high levels of debt.

It is busy exiting eight public sector legacy contracts and has addressed the governance concerns that resulted in Microsoft cancelling its EOH Channel Partner Agreement with the group's EOH Mthombo unit last year. However, it is still faced with costs related to a lengthy forensic investigation by law firm ENSafrica, as well as disposals and expenses associated with a business reorganisation.

To reduce operating costs, the group has exited 21 rental properties in the last six months and has reduced its headcount by more than 1,000 through business-as-usual efficiency measures. After exceeding its targeted R1 billion in disposals last year, it is continuing with more asset sales.

EOH said its results for the six months to end-January would show an improvement of at least 64% in its loss per share, while its headline loss per share would narrow by at least 47%. Although iOCO, its core ICT services business, performed well, its Nextec division remained challenging. It said the majority of businesses under the specialised solutions unit were unlikely to form part of the group going forward. More than 40 business have been sold or closed since the beginning of last year.

While the Covid-19 pandemic may affect its business, the group said it was difficult to quantify with any certainty what the impact would be.

Its shares rose 5.8% to R2.75 yesterday.

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